International donors have threatened to cut aid to Uganda unless the government tackles "high level corruption", it has emerged.

In a speech given to a budgetary workshop in Kampala, the World Bank's country director, Kundhavi Kadiresan, told the Ugandan president, Yoweri Museveni, that he needed to improve the management of public finances and "start fighting corruption seriously".

"The undeniable lack of government action to follow up on cases of grand corruption is a key area of development partner concern. Policies, laws and institutions are in place, but enforcement is limited, creating a culture of impunity," Kadiresan told the meeting last week.

It is understood that journalists were asked to leave the meeting before Kadiresan made her comments.

She went on to warn the Ugandan government that failure to act "will have implications, and donors under the Joint Budget Support Framework are currently considering a range of actions".

"This may include withholding disbursements, reductions in aid, or re-programming away from direct budget support etc. These were all options discussed and agreed to with the government in the 2007-08 budget appraisal."

The strongly worded speech was delivered at a national budget workshop in Kampala, believed to have been attended by the prime minister, ministers, MPs, civil society groups and representatives from the private sector. It is understood Museveni didn't attend.

According to the Observer, which broke the story on its website, discussions between donors and government officials were held last night to see if a way forward can be agreed.

Kadiresan began her speech by praising Uganda for its continued economic achievements, its poverty level reduction and the country's ability to weather the global financial crisis better than expected (a poll by Reuters yesterday showed that Uganda's economy may grow at a median of 6.2% this year while inflation is expected to remain in double digits). Kadiresan also recognised the country's efforts to better monitor government performance and for its work in bringing peace to the north.

However, she said Museveni's desire to see Uganda become a middle income country within the next 15 years rested on his ability to tackle corruption, increase economic growth, lower population levels and improve education and health services so Uganda can meet the Millennium Development Goals.

She said annual per capita income growth needed to reach 6%, which meant the economy needed to grow by almost 10% each year, something that would not be achievable unless population rates were cut. Kadiresan noted that women in Uganda wanted to have fewer children, but access to family planning services was limited.

"At 3.2% growth per year, Uganda has one of the fastest rates of population growth in the world. Uganda's population is projected to reach 38 million by 2015 and close to 100 million by 2050. This has serious implications for livelihoods, food security, maternal and child mortality, and the environment," said Kadiresan.

She pointed to Thailand, Malaysia and Indonesia as examples of countries that had achieved significant increases in per capita income since the 1960s but had also managed to dramatically cut their population rates.

As well as coming under fire for corruption, Uganda faces pressure from donors to withdraw its anti-homosexuality bill, which advocates the death penalty and prison sentences for repeat offenders. Sweden has said it would cut aid to Uganda if the bill is passed, and Britain, the US and Canada have condemned it.

In the run up to next year's presidential elections Museveni can expect his actions to be closely scrutinised by the international community. The British government has in the past withheld aid to Uganda when the country didn't move quickly enough towards multi-party elections and there were concerns over press freedom.